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GuruFocus has detected 4 Warning Signs with Flex Ltd $FLEX.
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Flex Ltd (NAS:FLEX)
Beneish M-Score
-2.75 (As of Today)

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

Flex Ltd has a M-score of -2.75 suggests that the company is not a manipulator.

FLEX' s Beneish M-Score Range Over the Past 10 Years
Min: -6.74   Max: 1.16
Current: -2.75

-6.74
1.16

During the past 13 years, the highest Beneish M-Score of Flex Ltd was 1.16. The lowest was -6.74. And the median was -2.51.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of Flex Ltd for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 0.9358+0.528 * 0.9564+0.404 * 1.2812+0.892 * 0.9824+0.115 * 0.8907
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2026+4.679 * -0.0511-0.327 * 0.9876
=-2.75

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $2,341 Mil.
Revenue was 6008.525 + 5876.813 + 5772.698 + 6763.177 = $24,421 Mil.
Gross Profit was 313.691 + 405.995 + 406.337 + 452.467 = $1,578 Mil.
Total Current Assets was $8,459 Mil.
Total Assets was $12,661 Mil.
Property, Plant and Equipment(Net PPE) was $2,336 Mil.
Depreciation, Depletion and Amortization(DDA) was $622 Mil.
Selling, General & Admin. Expense(SGA) was $1,012 Mil.
Total Current Liabilities was $6,854 Mil.
Long-Term Debt was $2,678 Mil.
Net Income was -2.508 + 105.729 + 61.344 + 148.91 = $313 Mil.
Non Operating Income was -8.388 + -3.529 + -1.481 + -44.415 = $-58 Mil.
Cash Flow from Operations was 279.62 + 263.932 + 196.673 + 277.777 = $1,018 Mil.
Accounts Receivable was $2,547 Mil.
Revenue was 6316.762 + 5566.248 + 5951.6 + 7025.054 = $24,860 Mil.
Gross Profit was 396.916 + 352.341 + 378.817 + 408.657 = $1,537 Mil.
Total Current Assets was $8,985 Mil.
Total Assets was $12,660 Mil.
Property, Plant and Equipment(Net PPE) was $2,218 Mil.
Depreciation, Depletion and Amortization(DDA) was $511 Mil.
Selling, General & Admin. Expense(SGA) was $857 Mil.
Total Current Liabilities was $7,033 Mil.
Long-Term Debt was $2,618 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(2341.393 / 24421.213) / (2546.81 / 24859.664)
=0.09587538 / 0.10244748
=0.9358

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1536.731 / 24859.664) / (1578.49 / 24421.213)
=0.06181624 / 0.06463602
=0.9564

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (8458.62 + 2335.959) / 12661.134) / (1 - (8985.494 + 2218.03) / 12660.339)
=0.147424 / 0.11506919
=1.2812

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=24421.213 / 24859.664
=0.9824

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(511.056 / (511.056 + 2218.03)) / (621.86 / (621.86 + 2335.959))
=0.1872627 / 0.21024275
=0.8907

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(1012.198 / 24421.213) / (856.787 / 24859.664)
=0.04144749 / 0.03446495
=1.2026

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((2678.115 + 6853.667) / 12661.134) / ((2618.178 + 7032.78) / 12660.339)
=0.75283794 / 0.76229855
=0.9876

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(313.475 - -57.813 - 1018.002) / 12661.134
=-0.0511

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

Flex Ltd has a M-score of -2.75 suggests that the company will not be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Flex Ltd Annual Data

Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14Mar15Mar16
DSRI 0.95081.38450.5811.35120.9140.95611.01371.15320.86510.9367
GMI 0.99281.15431.03180.81930.90711.07611.04550.8970.93340.8975
AQI 0.94280.89740.26810.54170.75021.0181.59061.06471.08422.0798
SGI 1.23321.46171.1230.77911.17971.03170.80321.10771.00150.9339
DEPI 1.13440.77690.97890.91511.38680.89870.97211.22460.82191.1047
SGAI 0.9571.00841.08031.00580.8861.06091.14230.98070.96391.2108
LVGI 0.97511.14011.46190.96970.99060.98530.9661.05340.96840.9945
TATA 0.0125-0.0621-0.6506-0.0733-0.009-0.0304-0.0747-0.0621-0.0212-0.052
M-score -2.25-2.04-6.25-2.98-2.52-2.60-2.75-2.55-2.71-2.48

Flex Ltd Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 1.01240.91990.88040.86510.7941.09791.15480.93670.97620.9358
GMI 0.85510.84670.90890.93340.92570.90720.88370.89750.90040.9564
AQI 1.15131.24681.20151.08421.06151.61972.03762.07981.97631.2812
SGI 1.15291.14641.09081.00150.92990.91810.91370.93390.98640.9824
DEPI 1.17241.03740.84690.82190.86660.9871.05661.10471.04830.8907
SGAI 0.89010.85380.87080.96391.05551.10241.15121.21081.18241.2026
LVGI 1.00180.97790.97470.96840.97820.99640.99050.99450.98770.9876
TATA -0.0304-0.049-0.0138-0.0158-0.0565-0.05-0.0392-0.052-0.0438-0.0511
M-score -2.45-2.60-2.53-2.68-3.03-2.51-2.26-2.48-2.40-2.75
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